Magazine article American Banker

FASB Chairman Takes More Knocks for Rule on Derivatives Reports

Magazine article American Banker

FASB Chairman Takes More Knocks for Rule on Derivatives Reports

Article excerpt

Financial Accounting Standards Board Chairman Edmund L. Jenkins came under more heat from Congress Thursday over the controversial derivatives rule.

"Your job is not making rulings; your job is making a consensus," Sen. Phil Gramm, R-Tex., told Mr. Jenkins. "You have failed to do this."

It was the second time in two weeks that Mr. Jenkins has been called to Capitol Hill to explain this new rule. Following up on an Oct. 1 hearing, Rep. Richard Baker, R-La., and 22 other House Banking Committee lawmakers on Wednesday urged FASB to delay the rule's effective date until Jan. 1, 2000.

The rule would require companies to report derivatives at fair market value on quarterly income statements, starting Jan. 1, 1999. Banks have complained the accounting rule would distort earnings.

Regulators also have criticized the plan, including Federal Reserve Board Chairman Alan Greenspan who suggested derivatives' fair market values be reported in income statement footnotes.

At a Senate Banking securities subcommittee hearing, Mr. Jenkins defended the accounting board's actions, saying that the rule is "all about the public's right to know."

"We must avoid putting the interest of any particular group over the interest of consumers," Mr. Jenkins said. He argued that while FASB was only required to accept comment on the plan once, it has done so five times since 1991.

Democratic lawmakers also defended FASB. Sen. Christopher J. Dodd, D-Conn., described complaints that the accounting standard would harm risk management as "insulting. …

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